Pricing the new Cadillacs

This is a topic that I’m sure has been beaten to death at GM’s Renaissance Center …how to price the new Cadillacs.

Of course, recent announcements have shown what decision has been made: Price them right in line with the targeted competition.

That’s the gamble. The stakes are Cadillac’s continued independence to pursue their new direction. Failure could mean GM management yanking them back into their old role as a Lincoln competitor (and dooming the brand to mediocrity).

The question for the rest of us, however, is ‘will typical Mercedes, BMW, Audi, Lexus, etc. buyers pay the same top dollar for a Cadillac?’ Has Cadillac’s image improved enough to command comparable prices?

It appears that Cadillac has decided that it has. Let’s take a look…

Exhibit A – CTS (the exception to the rule)

With a base price (as of the beginning of the 04 model year) of $30,835 w/ destination you can see Cadillac’s early reluctance to price their cars directly against BMW and Mercedes (whose comparable models are roughly 35k). This was certainly understandable since Cadillac was taking enough risks and did not want the bad press of having to pile rebates onto their newest car in the midst of efforts to remake themselves.

The success of CTS, however has emboldened Cadillac in their ability to draw buyers away from BMW, Mercedes, Lexus, etc. Though, many a Cadillac product planner are now kicking themselves for not pricing the CTS nearer to the competition – much to the glee of many new Cadillac buyers who see the CTS for the bargain that it is.

Exhibit B – SRX

With a single sales success on their hands with the CTS, you’d expect Cadillac to be slightly bolder with their next model. You’d be wrong. They were much bolder when pricing the 2004 SRX above almost all of the luxury cross-over competition from Acura, Lexus, and Mercedes. In fact, the only competitor that Cadillac undercuts is BMW’s X5.

Exhibit C – XLR

The production version of the car that debuted Cadillac’s new face could be the highest profile gamble. XLR, styled directly from the 1999 Evoq show car is one of Cadillac’s most impressive and ambitious efforts to-date. Based on the next Corvette platform and packing GM’s most advanced technology, this flagship is supposed to show what Cadillac can accomplish in the highly competitive luxury roadster market.

Again, Cadillac has not shied away from pricing their entry above many of their competitors. The XLR is easily many thousands more expensive than Lexus’ SC430 and is within spitting distance of Mercedes’ SL500.

Analysis

Cadillac has an uphill battle to win the hearts and minds of luxury buyers. They have certainly reached a point where they are competitive with the competition in terms of style, features, and quality (see this post about Cadillac’s JD Power reliability scores – Cadillac has far better dependability over 3 years than Mercedes, Audi, Volvo, and BMW). However, they still have to give customers a reason to try Cadillac after years of Cadillac being little more than a Lincoln competitor on a bland, dressed-up GM platform.

Lexus showed the way in the early 90’s – give them the same or better quality and style with a discount. That is a strategy that Cadillac would have been wise to copy.

As with their styling, Cadillac is taking the boldest possible route and challenging perceptions head-on by pricing themselves as if they had a long-standing reputation as a builder of high-end luxury cars (which is debatable).

Here’s hoping that this is the fastest path to the success they so richly deserve.